Correlation Between Prudential Short and Prudential Floating
Can any of the company-specific risk be diversified away by investing in both Prudential Short and Prudential Floating at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Prudential Short and Prudential Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Short Duration and Prudential Floating Rate, you can compare the effects of market volatilities on Prudential Short and Prudential Floating and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Prudential Short with a short position of Prudential Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Short and Prudential Floating.
Diversification Opportunities for Prudential Short and Prudential Floating
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prudential and Prudential is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Short Duration and Prudential Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Floating Rate and Prudential Short is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Prudential Short Duration are associated (or correlated) with Prudential Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Floating Rate has no effect on the direction of Prudential Short i.e., Prudential Short and Prudential Floating go up and down completely randomly.
Pair Corralation between Prudential Short and Prudential Floating
Assuming the 90 days horizon Prudential Short Duration is expected to under-perform the Prudential Floating. In addition to that, Prudential Short is 1.11 times more volatile than Prudential Floating Rate. It trades about -0.11 of its total potential returns per unit of risk. Prudential Floating Rate is currently generating about 0.24 per unit of volatility. If you would invest 904.00 in Prudential Floating Rate on August 29, 2024 and sell it today you would earn a total of 11.00 from holding Prudential Floating Rate or generate 1.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Prudential Short Duration vs. Prudential Floating Rate
Performance |
| Timeline |
| Prudential Short Duration |
| Prudential Floating Rate |
Prudential Short and Prudential Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Short and Prudential Floating
The main advantage of trading using opposite Prudential Short and Prudential Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Short position performs unexpectedly, Prudential Floating can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Prudential Floating will offset losses from the drop in Prudential Floating's long position.| Prudential Short vs. Dunham Porategovernment Bond | Prudential Short vs. Inverse Government Long | Prudential Short vs. Franklin Adjustable Government | Prudential Short vs. Fidelity Series Government |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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